MIT: Innovation and the economic impact of a research university
08/01/1997
MIT: Innovation and the economic impact of a research university
Lorraine Savage, Associate Editor
Research universities and industry working together is nothing new. However, a university`s influence can run deeper than just providing new technologies. Universities spawn the risk-taking entrepreneurs who found high-technology corporations. These new companies boost local economies and maintain contact with their founder`s alma mater, often exchanging information and advice.
The recent report MIT: The Impact of Innovation by the BankBoston Economics Department is the first national study of the economic impact of a research university - the Massachusetts Institute of Technology, Cambridge, MA. The report notes that 4000 companies founded by MIT students, graduates, and faculty today employ 1.1 million people and have annual world sales of $232 billion.
MIT-related companies are not typical of the economy as a whole; they tend to be knowledge-based companies in the high-technology field, such as software, electronics (including instruments, semiconductors, and computers), and biotech. They stress innovation, tend to export a higher percentage of their products, hold one or more patents, and spend more of their revenue on R&D. The greatest number of MIT founders (13%), as well as the greatest number of MIT students, come from the electrical engineering and computer science program.
The MIT entrepreneur
Company founders interviewed for the BankBoston report admitted that their stay at MIT had played a role in their decision to start their own companies. They said MIT encouraged them to become risk-takers and offered mentors and student opportunities to test the water in establishing their own business. One founder said that MIT instilled the entrepreneurial spirit in its graduates. MIT president Charles M. Vest added, "We are a magnet to bright students interested in cutting-edge science and technology, and we have a management school that helps create the appropriate environment."
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MIT-related companies in Silicon Valley (San Francisco, San Jose).
Vest explained MIT`s unique environment conducive to producing risk-taking entrepreneurs: "MIT was founded to be an institution that interacts with industry. Researchers with industry-relevant interests work in mutual respect side by side with scientists and others who engage in fundamental research and scholarship. We also conduct formal and informal activities that promote entrepreneurism."
These activities include the Center for Entrepreneurism, an Entrepreneurs` Club, and a "50K Contest" in which student teams create a product and business plan, with the prize being $50,000 to invest in actually forming a company. Moreover, the MIT Association of Alumni and Alumnae operates the Enterprise Forum, which brings successful entrepreneurs to meetings to share experiences and critique the plans of those who would like to start a new company.
"In my opinion," said Vest, "the Institute`s ethos is even more important than formal programs in stimulating high-technology entrepreneurs."
Location, location, location
In deciding where to locate their new company, MIT entrepreneurs said the quality of life in their community, proximity to key markets, and access to skilled professionals were the primary factors, rather than taxes and regulations, according to the BankBoston report.
More than 50% of the MIT-related companies are located outside the Northeast. These companies have a major presence in the San Francisco Bay Area (Silicon Valley). The five states benefiting most from MIT-related jobs are California (162,000), Massachusetts (125,000), Texas (84,000), New Jersey (34,000), and Pennsylvania (21,000).
According to the report, the bulk of MIT-related employment in California is in the Silicon Valley area around San Jose and the San Francisco Bay area (see figure). Total Silicon Valley employment of MIT-related companies is just over 73,000, about half of total California employment of MIT-related companies. Of these, some 46,000 jobs are in electronics. In the San Jose area, 29% of all electronics employment comes from MIT-related companies. The largest MIT-related firms in the region include Hewlett-Packard, Intel, National Semiconductor, 3Com, Tandem Computer, Raychem, Cirrus Logic, Lam Research, Genentech, and Symantec.
In Massachusetts, there are 60,000 MIT-related jobs. Examples of companies representing cutting-edge technologies in their fields are Analog Devices Inc. and Analogic in integrated circuits, Cabot Corp. and American Superconductor in advanced materials, and Teradyne in testing equipment for electronic components. In the last five years, over 45% of the newly founded MIT-related companies in software, the Internet, biotech, and electronics have been located in Massachusetts.
The report noted that Boston, compared to Silicon Valley, is the lower cost location for attracting top technical help. Although California taxes are more than comparable to those in Massachusetts, the New England state has more vacant land for housing and industrial expansion than northern California.
The electronics field holds about 380 MIT-related companies, which employ 635,000 people. Although these firms make up only 13% of MIT-related companies, they account for 57% of employment and 56% of sales. The average electronics firm has 2100 employees. Software, electronics, and biotech account for 66% of the employment in all MIT-related companies. These high-tech, high-growth firms are more likely to be located in California or Massachusetts. These two states account for 70% of all MIT-related electronics firms.
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Innovation system
In an April speech at the New England American Business Press meeting in Cambridge, MA, MIT`s Vest defined the nation`s innovation system for inventors and innovators of new technologies as "industrial, academic, and governmental institutions working together in a loosely-coupled manner to create new knowledge, new technologies, and people with the skills to move them effectively into the marketplace."
Vest said that the federal government plays a crucial role in supporting education and research at universities. "Many of the innovations that enabled our graduates to found new businesses were based on research that was originally supported by federal grants. Some of the fastest growing industries in the American economy, including health care, computing, and communications, owe their origins and their rapid expansion directly to federally supported university research."
The BankBoston report agreed, finding that government research funding has played a powerful role in the formation of the kind of high-tech companies founded by MIT graduates and faculty. Hundreds of millions of dollars of defense research into semiconductors and electronics, much of it in New England, laid the foundation for the modern computer industry.
One example of government working with MIT is the research conducted by MIT`s Departments of Materials Science and Engineering, Physics, and Electrical Engineering and Computer Science, which have created a photonic band gap (PBG) microcavity resonator that may improve the efficiency and information-carrying capacity of fiber-optic communication systems. Its submicron dimensions (minimum feature size is 0.1 ?m) make it smaller than any previously designed optical waveguide by a factor of 100. These devices can be constructed right on a microchip for direct interfacing with other electronic devices, further increasing information processing speeds and lowering signal loss. In addition, since the resonator is used for light-emission applications instead of signal transmission and filtering, it can provide the capability for the development of microlasers and microLEDs.
Funding for this project was provided by MIT`s National Science Foundation-Materials Research Science and Engineering Center, the Defense Advanced Research Projects Agency, and the Air Force Office of Scientific Research. Graduate students, professors, research scientists, and research staff members worked together on the project.
MIT also joins forces with private industry. The NanoStructures Laboratory at MIT is working with Suss Advanced Lithography Inc. (SAL), Waterbury Center, VT, a developer of x-ray lithography, to develop the interferometric broadband imaging (IBBI) alignment and gap setting system. SAL is working with the program`s principal investigator, Henry Smith of MIT`s Department of Electrical Engineering and Computer Science, in developing the IBBI system to improve the present performance of the SAL stepper.
To help further the cooperation between research universities and industry and government, Vest noted, "First, we need to maintain the tight coupling of research and education. Second, we must maintain strong federal R&D budgets. Third, we need to build a better public understanding of the nation`s innovation system, and the role of research universities in it."